Gold And Tax

I just wouldn't claim it. How would they ever find out?

Some people say thats dishonest but really, if you work for a living and pay your federal income tax and your state income tax and your property tax and your sales tax and your humina humina humina then I would be able to sleep at night not reporting a little bonus money made off of my hobby.

Yes. You must pay taxes on it.
Will they find out if you don't? NO.

I was at a flea market the other day and there were
Florida state revenue officers going around and asking
vendors for ID and taking notes on what they were
selling and how busy they were at times. The vendors
got a written notice that Florida expects to get their
'cut' from sales tax within 14 days! Didn't even give
them a stamped envelope either!

My guess is that it cost more in salary for those
officers to mull around a flea market on Saturday,
than the amount of tax that will be reported over
those next 14 days! What a joke.

Next they'll send revenuers to stand around at
everyone's yard sales. :rolleyes:

More than likely the Bullion Exchange has a system to keep track of what they buy, & who they buy it from. They certainly aren't going to pay any more tax than they have to, so it's possible you will get caught.

Theoretically, you are supposed to pay tax on the profit, less any expenses. The IRS doesn't know what you paid, but if you get audited the burden of proof is on the individual. Bullion is not generally considered a collectible so you can declare a loss. I'm pretty sure if you have held the gold for more than a year it falls under long term capital gains, with a max tax rate of around 20%. If you bought several years ago at $300/oz & sell now for $900, you are looking at a $24K profit & a $4800 tax burden. I'm not a CPA or Tax Attorney, & I don't play one on TV.

I'm not advocating anything illegal, but I have heard of people in a similar situation selling to a private individual for cash. Of course then you have the problem of what to do with the cash. You can't deposit amounts larger than $10,000 without being reported. A series of deposits just under the limit can also trigger reporting.

Page 48 of pub.550 includes coins and precious metal investments as reportable capital gains.

http://www.irs.gov/pub/irs-pdf/p550.pdf

If the dealer issues you a 1099B which documents the transaction, I would report it. If the dealer doesn't issue you a 1099B, check out that bill of sale that the dealer writes up. Does it have your name, address, SS# on it? Whether it does or not really doesn't matter to the IRS because they say you must report the gain. If he pays you by check, that in itself is a paper trail if either one of you is audited.

Question 3: They don't. But if you were audited they could estimate a cost basis for you. What if the 40 eagles were a gift? Surely, you wouldn't be accountable for the entire hoard's value, would you?

That brings up an interesting question. You dump your coin collection on a dealer and he records the $75,000 sale on a 1099B. How do you figure out the cost basis? Over the decades, which slabs of metal came from coin-roll hunting, grandma, metal detecting, etc? Did you keep records for every purchase on the internet, coin-shop, coin-show, auction, yard sale, etc.? Though the sale of a coin collection is such a common transaction, I've searched the internet for an answer and couldn't come up with one.

If you stored them in a safety deposit box and nothing else in there, you should be able to deduct the SDB costs from the profit should you decide to pay the taxes on the gains. Also, any expenses from mileage for going to the coin shop/bullion place, going to the bank to put them in the SDB, etc should count. With a little legwork and proper documentation, you should be able to wipe out a good portion of the profit you made on these, thus reducing your tax burden.

Personally, I keep track of what each coin in my collection cost (well I should say the ones I put in 2x2 holders anyway but not the stuff in boxes like common wheats). I also just started keeping track of mileage as well.

I second that it was a gift Mr IRS person

Huh, restoring the Union? People have tried to claim the 5th amendment defense concerning tax returns but the Supreme Court has always rejected that idea. As much as I hate paying taxes, they are absolutely necessary.